Does Bitcoin Use Affect Crime Rates?
Abstract
Bitcoin is the most widely used cryptocurrency in the world because of its decentralized network that completes user-to-user transactions, eliminating the need for intermediaries. During 2017, the volume of Bitcoin transactions totaled $94.3 trillion. Bitcoin transactions are recorded in a public database called the blockchain. Although the blockchain can keep track of how many transactions there are, it can’t identify the people involved in transactions. The lack of identity increases the anonymity of Bitcoin transactions, making it less detectable when used for crime. Using the Uniform Crime Reporting’s state-level crime rate data and blockchain’s Bitcoin transaction information, I estimate the effect Bitcoin use has on crime rates using an ordinary least squares approach. Previous studies analyze the link between crime and anonymous cryptocurrencies by citing cases in which they are used for: money laundering, trading illegal goods and services, financing terrorism, fraud, and tax evasion. Bitcoin makes crimes less detectable, therefore, I expect reported crime rates to decrease as Bitcoin use increases.
Does Bitcoin Use Affect Crime Rates?
Bitcoin is the most widely used cryptocurrency in the world because of its decentralized network that completes user-to-user transactions, eliminating the need for intermediaries. During 2017, the volume of Bitcoin transactions totaled $94.3 trillion. Bitcoin transactions are recorded in a public database called the blockchain. Although the blockchain can keep track of how many transactions there are, it can’t identify the people involved in transactions. The lack of identity increases the anonymity of Bitcoin transactions, making it less detectable when used for crime. Using the Uniform Crime Reporting’s state-level crime rate data and blockchain’s Bitcoin transaction information, I estimate the effect Bitcoin use has on crime rates using an ordinary least squares approach. Previous studies analyze the link between crime and anonymous cryptocurrencies by citing cases in which they are used for: money laundering, trading illegal goods and services, financing terrorism, fraud, and tax evasion. Bitcoin makes crimes less detectable, therefore, I expect reported crime rates to decrease as Bitcoin use increases.